Profound Medical Corp

TSX:PRN

Earnings Call Analysis

TULSA's Progress and Expansion in Prostate Treatment

In 2023, the groundwork for TULSA as a mainstream prostate cancer treatment was solidified, achieving a significant presence in top US cancer centers. TULSA's installed base is projected to grow to 75 by end-2024. Gaining new CPT codes, TULSA anticipates favorable Medicare reimbursement starting January 2025. Technological advances include FDA's clearance of the Thermal Boost AI module and a pending Contouring Assistant module. The collaboration with Siemens Healthineers aims to deliver a comprehensive diagnostic and interventional MR solution. The company has witnessed 60% growth and expects more, though specific revenue guidance for 2024 wasn't provided.

Revenue Growth and Operating Expenses

Revenues in the fourth quarter of 2023 hit the $2 million mark, achieved entirely from recurring sources, marking a notable 60% increase from the $1.3 million reported in the same quarter the prior year. Operational expenditures for the quarter saw a restrained growth of 5% year-over-year to $9.8 million, with the most substantial increases observed in selling and distribution, which surged by 74% to $3 million.

Net Loss Improvement and Financing Gain

Even as total expenses rose, the company managed to narrow its net loss to $8.9 million, or $0.42 per share, compared to a net loss of $9.5 million, or $0.46 per share, over the same period last year. A successful financing round post-year-end infused an additional $19.2 million into the coffers, bolstering the cash position to $45.4 million as of January 31, 2024.

Expansion of TULSA Procedure Indications

Throughout 2023, TULSA, the company's flagship technology, broadened its application beyond primary prostate cancer treatment to include patients with dual diagnosis of cancer and BPH. The year also witnessed a twofold increase in the use of TULSA for patients with concurrent prostate cancer and BPH symptoms, solidifying its position as a unique treatment option that marries efficacy with an enhanced patient quality of life.

Clinical Trial Advancements

The CAPTAIN post-market study aimed at comparing TULSA to radical prostatectomy is making headway, with expectations set for completing enrollment within the year. Preliminary findings are anticipated for the first half of 2025, while primary safety and efficacy outcomes will follow in early 2026 and early 2028, respectively.

Strategic Developments and Growth Pillars

2023 was pivotal in developing the groundwork for establishing TULSA as a mainstream treatment for prostate cancer, akin to radical prostatectomy or radiation. Tangible milestones include an increase to 50 TULSA-PRO sites, significant penetration at top cancer centers, as well as innovative strides with AI modules designed to further boost treatment accuracy and efficiency.

Advancing Towards Reimbursement

As TULSA prepares for a payment model shift in 2025, the company acceleration of its U.S. reimbursement strategy is notable. With new CPT codes established mid-2023 and the CMS's forthcoming payment determinations set to be unveiled in July, enhanced financial predictability and an increase in hospital-based TULSA usage are projected.

Prospects for U.S. Capital Sales and ASC Integration

Looking ahead to 2024, the company is poised for a shift with potential capital sales of the TULSA system, as well as a broader expansion into ASCs by discussing full motor treatment pathways. Continued dialog with mid-tier hospitals and ASCs is expected to further the adoption and integration of the technology.

Vision of a Full Continuum of Prostate Care

Long-term aspirations with corporate partners like Siemens suggest a future where patients can receive comprehensive prostate care, from diagnosis to treatment, within a single facility, leveraging the latest imaging technology and a robust treatment protocol like TULSA-PRO. Such partnerships potentially usher in a new era of streamlined and patient-centered care for prostate disease.

Earnings Call Transcript 2023-Q4

[Operator]

Good day, and welcome to the Profound Medical Fourth Quarter and Full Year 2023 Financial Results Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Stephen Kilmer, Investor Relations. Please go ahead.

[Stephen Kilmer, executive]

Thank you. Good afternoon, everyone. Let me start by pointing out that this conference call will include forward-looking statements within the meaning of applicable securities laws in the United States and Canada. All forward-looking statements are based on Profound's current beliefs, assumptions and expectations and relate to, among other things, expectations regarding the efficacy of the company's treatment technologies, results of future clinical trials the ability to obtain coding and our reimbursement from third-party payers, anticipated financial performance, business prospects, strategies, regulatory developments, market acceptance and future commitments.

Such statements involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements to be materially different from those implied by such statements. No forward-looking statement can be guaranteed. Listeners are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this conference call. Profound undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, other than as required by law. Representing the company today are Dr. Arun Menawat, Profound's Chief Executive Officer; Rashed Dewan, the company's Chief Financial Officer; and Dr. Mathieu Burtnyk, Profound's Chief Operating Officer.

With that said, I'll now turn the call over to Rashed.

[Rashed Dewan, executive]

Good afternoon, everyone, and welcome to our fourth quarter 2023 conference call. On behalf of the management team and everyone at Profound, I would like to thank you for your ongoing interest in our company. For those of you who are shareholders, we appreciate your continued interest and support. I will turn the call over to Matthew in a moment to provide updates on TULSA clinical publications utilization trends and the CAPTAIN clinical trial.

However, before I do, I'd like to provide a brief summary of our fourth quarter 2023 financial results. To streamline things, all of the numbers I will refer to have been rounded, but they are approximate. For the 3-month period ended December 31, 2023, the company recorded revenue of $2 million with the full amount coming from recurring revenue. This was at the top of the range we provided when we announced preliminary fourth quarter revenue numbers at the beginning of January. Fourth quarter 2023 revenue increased 60% from $1.3 million from the same period in 2022. Total operating expenses in the 2023 fourth quarter, which consists of R&D, G&A and selling and distribution expenses were $9.8 million an increase of 5% compared with $9.4 million in the fourth quarter of 2022.

Breaking that down further, expenditures for R&D increased 28% on a year-over-year basis to $4 million. G&A expenses increased by 41% to $3 million and selling and distribution expenses increased by 74% to $3 million. Net finance cost for the 2023 fourth quarter was $400,000 compared to $500,000 for the same 3-month period of 2022. Overall, the company recorded a fourth quarter 2023 net loss of $8.9 million or $0.42 per common share compared with a net loss of $9.5 million or $0.46 per common share for the same 3-month period in 2022.

As of December 31, 2023, Profound had cash of $26.2 million that amount does not include a graded gross proceeds from a public offering in the U.S. and the [ prior ] placement of common shares in Canada completed subsequent to year-end. As a result of this financing, Profound had cash of $45.4 million at January 31, 2024. With that, I will now turn the call over to Matthew.

[Mathieu Burtnyk, executive]

Thank you, Rashed, and hello, everyone. In the fourth quarter, there were many poster and podium presentations featuring TULSA that continue to demonstrate the unique pixel by pixel precision of the technology, the flexibility to treat a variety of patients and customize the treatment plan to what is best for the patient and the durability of efficacy and safety outcomes. I would like to take a few minutes to highlight a few of these.

The positive 5-year TACT Data was presented at some major meetings, including presentations by Dr. Agner from the University of Chicago at the Annual Meeting of the Society of Urological Oncology in Washington, D.C. UCLA, Dr. Ramon at the Radiological Society of North America or RSNA meeting in Chicago; and Dr. [indiscernible] from [indiscernible] University Medical Center in the Netherlands at the European Congress of Radiology meeting in Vienna, Austria. In addition, Dr. Busch gave two presentations in November, where he and his colleagues at the Busch center examined TULSA outcomes in men with specific prostate cancer characteristics that are known to be challenging with other treatment modalities.

One is patients with very large prostate volumes, and the other is those with extreme apical cancers. The first was a poster presentation of a retrospective analysis of TULSA and men with prostate larger than 90cc presented at the Frontiers and Oncological Prostate Care and Ablative Local Therapy Meeting in Chicago. 34 men with pre-TULSA prostate volumes greater or equal to 90cc were identified were about half the proceeds greater than 120cc and the largest prostate included in the analysis was 275cc. Favorable efficacy and safety outcomes were reported following treatment with TULSA, including an improvement in urinary quality of life with median IPSS improving 60% from 17, which is moderate [indiscernible] for lower urinary tract symptoms to 6, which is mild less. The second was a podium presentation of another retrospective analysis of TULSA, but this time in men with prostate cancer lesions at the Extreme APEX presented at RSNA.

Patients with apical lesions are particularly challenging. Because of the proximity to the external urinary sector, it is difficult to maintain urinary continence when treating prostate cancer at the extreme prostate feedback using robotic surgery, radiation and focal therapy devices such as HIFU Kryo and IRE. Further, while limiting apical treatment can minimize morbidity in the focal therapy space, it conversely increases the risk of cancer recurrence. For example, one study by Dr. [indiscernible] in BJU International reported that when a 6-millimeter apical margin was applied with HIFU, 60% of the recurrences were identified at apical [indiscernible] on biopsy.

With TULSA, the surgeon has the ability to deliver controlled, directional and precise ultrasound energy in a perpendicular plane from a transurethral device that is positioned in the prostate with submillimeter accuracy based on intraprocedural high-resolution MR imaging. Specifically, the unique combination of urethral cooling and dual frequency capabilities which allows a higher ultrasound frequency with shorter wavelength, enabled tight margins and treatment right to the apical plane while limiting the amount of sound energy being absorbed in the external urinary sinter.

This retrospective analysis of 42 men with lesions of budding or involving the apical center, demonstrated promising safety and efficacy of TULSA in patients with extreme apical lesions, notably preserving pad-free urinary continence in all patients despite ablation near the external [indiscernible]. Moving to real-world utilization trends. As highlighted in today's press release, we also continue to see TULSA providers treat an unrivaled variety of prostate disease patients. With respect to indications, approximately 67% were treated for primary prostate cancer, 23% were hybrid patients suffering from both cancer and BPH. 7% were salvage treatments and 3% were men with BPH only. Further, within the salvage group, roughly 1/2 of the men were radiorecurrent prostate cancer and about half were salvage treatments after focal therapies such as HIFU and Laser.

Overall, in 2023, we saw that TULSA is increasingly being used in patients who are diagnosed with prostate cancer but also have symptoms of BPH. With an approximate doubling as a proportion for utilization trends in 2022. We continue to see TULSA as the only minimally invasive option for such patients. More and more, urologists are starting to include the transition zone in addition to the cancer lesion in such type of patients for two reasons. The first is the added benefit to the patient of lower urinary tract symptom relief, which improves their quality of life. And secondly, because in doing so, there is no additional procedural complexity and minimal increase in ablation time. So in a way, there is no real downside for the treating physician and provider with a lot of benefits for the patient.

Finally, I would like to provide a brief status update on our ongoing CAPTAIN post-market study. The CAPTAIN randomized trial comparing the TULSA procedure to radical prostatectomy is the first and only Level 1 study comparing head-to-head a new technology to a standard of care treatment in men with localized prostate cancer. It is designed to demonstrate that the efficacy of the TULSA procedure is not inferior to radical prostatectomy while also demonstrating superior quality of life outcomes. We are pleased to report that the rate of recruitment is continuing to increase with investigator experience and onboarding of additional sites. As a result, we believe we remain well positioned to complete enrollment of the CAPTAIN study this year, which would allow publication of preliminary data in the first half of 2025 followed by the full 1-year primary safety outcomes in early 2026 and 3-year primary efficacy outcomes in early 2028.

Now I will turn the call over to Arun.

[Arun Menawat, executive]

Thank you, Matthew, and good afternoon, everyone. I'm pleased to report that we successfully executed against key strategic priorities in 2023. The most important of those was to continue laying the groundwork for TULSA to become one of the three mainstream treatments for prostate cancer alongside radical prostatectomy and radiation therapy. In addition to what Matthew just reviewed, there are 3 main pillars of that, I would like to focus my remarks on today.

First is to build a high-quality installed base. I'm pleased to report that we now stand at 50 TULSA-PRO sites comprised of early adopters, independent and corporate centers and top-tier hospitals. While our team has done a really good job with all 3, the penetration we have achieved into the latter really stands out as truly exceptional at the stage we're in today. TULSA-PRO is now already installed at or contracted with 10 of the top 20 cancer centers in the United States. These include prestigious institutions such as MD Anderson, Mayo Clinic Rochester, UCLA Medical Center, Brigham & Women's Hospital, Johns Hopkins Hospital and Cleveland Clinic, among others.

Moving forward, we continue to expect our installed base to grow to 75 by the end of 2024, and we anticipate that TULSA usage which is primarily based upon cash paid today will be transitioning to the payer pay model at the start of 2025. Speaking of that transition, the second pillar is the execution of our U.S. reimbursement strategy for TULSA in record time. As you all know, in mid-2023, the American Medical Association established 3 new CPT Category 1 Code for TULSA. Following that, as part of the process, the Relative Value Scale Update Committee or ROC for short, send questionnaires to TULSA users to determine the physician work relative value units or RVUs associated with its TULSA procedure. Based on the user feedback, the center for Medicare and Medicare Services or CMS is working with the societies that sponsored the CPT Category 1 Code application to determine the TULSA procedure payment amount that will be attached to the permanent codes.

The proposed recommendations are expected to be published in the farwell register at the end of July and finalized in November and come into effect as of January 2025. The third pillar is to continue to innovate with the overall aim of increasing treatment efficacy, improving workflow efficiency and expanding technology access to deliver an even better TULSA treatment experience for urologists and their patients. On that front, we continue to aggressively build the TULSA AI brand. Thermal Boost for which we received 510(k) clearance from the FDA in Q3 2023 was the first TULSA AI module. It is now routinely used in about 50% of patients being treated and physicians report increased confidence and shorter time in treatment. We have recently submitted the second AI module, the Contouring Assistant to the FDA.

This TULSA AI module is about automating the treatment design. Contouring Assistant uses past treatment designs and recommends a design in a new procedure based upon that knowledge. As our treatment and outcome database grows, the knowledge of the AI will continue to increase. And as a result, Contouring Assistant proposed treatment designs will continue to improve, thereby enhancing clinical outcomes while also reducing treatment types. Studies conducted to validate the AI technology, have achieved the anticipated endpoint. If the FDA concurs clearance for the Contouring Assistant Module could be granted this summer. MR Imaging is now being used routinely in diagnosing patients for prostate disease. We believe that this trend naturally extends to the use of the MR also for the treatment of prostate.

Thereby, we have also begun work to build closer relationships with MR companies to help maximize the tremendous opportunity for our technology that we see ahead. The first such collaboration which we announced last week was with Siemens Healthineers to work toward bringing a complete therapeutic solution combining our TULSA-PRO system with its Magnetron Freemax MR Scanner to market [ the Profound ] own sales force. Not only is this arrangement not exclusive, but we will also continue to market TULSA-PRO as a stand-alone offering, providing our customers with the flexibility to use the technology with the MR hardware of their choice. The aim of the collaboration with Siemens Healthineers is to create end market a total diagnostic and interventional MR solution that can streamline virtual, optimize cost of care, and most importantly, help ensure TULSA can be integrated in additional headings such as urology clinics, ASCs and hospital surgical departments that may not be suitable sites for placing large traditional MR scanners that are relatively expensive, both in terms of acquisition and installation costs. And ongoing operating cost.

It will also allow Profound to begin adding some U.S. capital sales to our TULSA revenue mix. We will provide more details closer to when Profound initiated sales of the combined solution in 2025. In the meantime, we also hope to be able to announce additional technology partnerships this year. To summarize, TULSA is not just for focal therapy. There continues to be significant evidence from clinical trials as well as from commercially treated patients that we believe that TULSA is on its way to becoming one of the mainstream technologies for the treatment of prostate cancer. We are eagerly awaiting a positive CMS decision regarding the TULSA reimbursement rate to be made at the end of July. We are thrilled that even at this early stage, when most patients are cash-pay patient adoption continues to increase. We are also excited by increasing use of MR in the care continuum of prostate disease management.

Today, hardly any prostate diagnosis is complete without MR imaging. We believe that an MR centric strategy for prostate management is the future, and we are working with the leading MR manufacturers to further support this modern treatment pathway. And finally, we're delighted with the progress of patient recruitment in the Level 1 clinical trial that compares the TULSA procedure, with radical prostatectomy. We believe that the success of this trial has the potential to gain TULSA's inclusion in the society guidelines, which is always a key driver for new technology adoption. This ends our prepared remarks for today.

With that, we're happy to take any questions you might have. Operator?

[Operator]

[Operator Instructions] Our first question comes from Rick Wise with Stifel.

[Unknown Analyst]

Just to start off with the CPT Code progress. You've been very clear about the timing, and it sounds like the 10 months are exactly as you've hoped and expected they might be. Can you just add any color to your perspective? Have you had any interaction with CMS? Have they had any questions? Has your confidence about both the timing and/or the potential possible amounts that they might pay. Do you have any incremental color or perspective to offer there?

[Arun Menawat, executive]

Sure. Yes. No, I think, Rick everything kind of moved along as we anticipated. We've had two meetings with CMS already this year in January. We have been in communication with them on any questions and so on. So I think we are pretty comfortable with the dialogue with CMS obviously, it's hard to predict what their final decisions will be. But I think the logic and the data that is available to us, I think, continues to support the theories that we have that we should be able to have appropriate reimbursement amounts for this application.

[Unknown Analyst]

Yes. And another question, Arun, any comments on the revenue guide or outlook for '24? At this point, without just thinking our own thoughts -- are thinking about something in the $12 million or so kind of range? And given the numbers you're talking about and your growing installed base and the service associated, et cetera, etcetera. Is that a reasonable place or a midpoint of a range or how would you guide us so we can do it [indiscernible]?

[Arun Menawat, executive]

Yes. No, Rick, first of all, I really do appreciate the question. And I think if I look at history, I think our growth rate today is about 60%. And I think if we extrapolate, I think that the fact that the utilization per site is growing, the fact that new centers coming on board, I don't have the ability to provide a decent guidance at this point, but I think I can tell you that our team continues to be excited about the growth. There are a couple of pluses and minuses with respect to 2024. The pluses are that the sites are going to be increasing. And we think that based upon reimbursement and the feedback that we're getting, we think we will start to mix some capital revenue with our recurring revenue going forward, which generally, as you know, can actually ramp the top line a little bit faster.

So I think directionally, I think we're feeling okay -- driven fairly okay. I think the negative side, because as you know, we're building a game-changing technology, and there are always all kinds of different things that go on. And I think the negative side, I guess, is that majority of our patients today are cash-pay patients. And so this is also the year where certainly in the second half, there will be sites that we'll be looking to transition to the payer pay model. And if these are hospitals, they will start to really use the temporary code and start to streamline the reimbursement coding and so on. And certainly, once the July happens and they know what the numbers are going to be, I think that the dynamics of the, how they look at utilization will change. And so I think that is certainly one of the things we're looking and watching is how is that going to affect it. But I think generally speaking, we're feeling fairly comfortable with continuing to increase the top line in '24.

[Unknown Analyst]

So you're saying, just to make sure I'm understanding your comment. So you're saying that hospitals might slow down as they wait for the code to be installed? So the second half might be softer? And just to make sure I'm understanding your intention there?

[Arun Menawat, executive]

Yes. No, I wouldn't just everything properly. I think that what it is as I said, the majority of the patients are cash-pay. So the question is really the concierge practices that are set up for cash pay, I think they will continue. They're not going to change because to them, the benefit is they will still charge the same, but the patient will then have the information that the patient will on their own contact their insurance and they'll get paid for the net-net outlay of cash to the patients will be reduced, but the concierge practitioners we will continue to make the same amount of money. So I don't envision any issue there. And that, in fact, could be, will be a positive in '25. Where I think that we'll see how it goes in the hospitals where they're not necessarily big on cash patients, and there, they might be wondering will do I, keep advertising or doing this or do I wait another quarter or 2? And so on. So I don't know how big that risk is. I'm not sure if it is any risk there. I just think that it's something that we're cognizant of.

[Operator]

Our next question comes from Rahul Sarugaser with Raymond James.

[Rahul Sarugaser, analyst]

Matthew, please accept the congratulations on your recent promotion. So my first question is we see that sales and marketing costs ramping. And so could you provide a bit more color on the expansion of the sales team? Specifically the balance between sales folks focused on selling new devices versus those focused on increasing utilization of each site within the existing installed base fleet?

[Arun Menawat, executive]

Sure. So I think that's a great question because one of the things that we have in working towards is to build a great sales team. So over the last 4 months or so, we have, we built the infrastructure, number one. So we have, obviously, we have a fantastic rep of sales with Adam. And we have regional managers so that the regions have focused with a manager, we have 4 regions. And that underneath each of those, we have about, our plan is to be about five with each [indiscernible] will have about 16 to 20 people in the, in each of those regions. We have about 4 or 5 opening positions at the moment. And I think the expectation is that the ratio of the hunter versus farmer is about 50-50.

So that we will, the farmers are driving the usage and the hunters are looking at, new agreements. So, and then we think that this structure is a scalable model. And so we will start to scale as the revenues ramp in each region.

[Rahul Sarugaser, analyst]

Great. That's really helpful color. So my second question is, so not only team's collaboration. Are you able to share any more color on what you're hearing from current prospective ASD and [indiscernible] customers about their needs? Specifically how such a one-stop solution may ease or shorten the sales cycle? Both for these ASDs but also potentially for hospitals?

[Arun Menawat, executive]

Yes. So well, it starts with what we are calling the modern treatment pathway. And the AUA guidelines are now basically saying that MR should be done to properly diagnose the patient. And there are clinical publications and these publications are basically saying that if a cancerous lesion is visible on the MR, it should be treated. And so there is a shift in the sense that historically, we've looked at the Gleason Scores to determine whether or not it's an early stage and should we wait before we treat these patients? And or if it's a recent score line or higher that we should perform radical procedures on these patients.

The idea that there's a lot of clinical data that is supporting is that perhaps we should even screen patients with MR and will certainly diagnose the patients with MR, and then if the lesion is visible on the MR, then the patients should be treated. And obviously, it's a natural progression for them to say, well, if I'm screening and diagnosing them with MR, if I'm particularly looking at lesions that are MR visible then why would I not treat with TULSA, which uses the same real-time MR? So if you put all this together, that's one pathway that is emerging at the moment. The second thing that is going on is that the MR technology is evolving also. So the new MRs that are coming out are generally considered minimal helium or helium free, and helium is a big return because it forces a lot of maintenance costs on MRs.

And so now the new ones that are coming out, particularly the one we signed on for Siemens is effectively helium-free or minimum helium it's a closed-loop helium system. And with the software technology and the latest hardware technology, they can actually go to a lower magnetic strength, Tesla is how they measure it, lower magnetic strength. And so the bottom line to all this is the new MRs can give you diagnostic quality images but big way, for example, 1/3 of the weight of irregular MR. We internally talk about it is like -- it's less than GBP 8,000, which is like you can use a Ford F250 to tow these devices, and you don't need the kind of foundation they don't need to be separated from a hospital or an ASC. So if you put all of this together, what you're seeing is that an ASC or even a [indiscernible] hospital practice, and then own the whole thing. They can own an MR that is of this new generation. And they can do screening diagnosis, they can own the whole patient pathway.

And you can imagine how game changing how big this has the potential to be. And so this is the beginning of this first relationship we've done with Siemens. It is the beginning of that idea that they can own the patient from the beginning. They can do all of this. They will send images to the radiologists to do the diagnostic part, but they can make money on facility payments on all of these procedures. So we think that there is control of the patient, the smoothing of the workflow. So we think that there is an economic model here that's pretty compelling. And so that's, that's what this is all about. And I think as we indicated in the prepared remarks, we think this is the first of more of such things, and we'll be talking with you in the public domain about when we expect the first of such site that can perform all of these procedures and be able to provide this new modern treatment pathway. I know that's a little long-winded, but I hope it is helpful.

[Rahul Sarugaser, analyst]

That's very helpful. [indiscernible] very closely. And if you don't mind one last important question. So one of the main questions we get is on what the amount of reimbursement will be? So you've already provided a lot of color on the process with the [indiscernible]. And so given that reimbursement of robotic surgery is in [ $10,000 to $17,000 ] range, based on what you're hearing from sites. Is there a range given the investment that you might be able to say that you're confident that TULSA should secure?

[Arun Menawat, executive]

Yes. So I know Rick was asking something similar to that. So maybe I can elaborate a little bit. So I think the bottom line, I don't envision that there will be a negative impact to the economics, whether it's radical prostectomy or TULSA. I think that there is logic and a lot of data that supports that we will be in the same lead. And I think that, so that's certainly one of the points. The second point, I think, is that as we've talked before, there is a temporary code, a C-code and leading hospitals are using that C-code. And in 2023, that C-code, the payment amount of that C-code, it changes kind of every year. But in 2023, that C-Code was paying $12,700. And that amount was based upon the cost analysis that was done by CMS on the patients that were treated with TULSA.

So logic, and I want to underscore works logic because basically, the analysis that the CMS does for the permanent code is fairly similar to the announcement they do for these temporary codes. So the logic is that it should not be very different from where we are in the temporary phase. Having said that, I want to emphasize exclusively that ultimately CMS can do anything they want. They do. And so I cannot probably see that, that's where it's going to be. But I can, this is the best I can provide that I do think that there won't be anything that will be negative as compared to medical prostatectomy. I feel fairly comfortable with that. And I think that the logic at least says that we will be in the same range as where the temporary is.

[Operator]

Our next question comes from Michael Sarcone with Jefferies.

[Michael Sarcone, analyst]

I just had a clarification on one of your responses, Arun, to one of Rick's question. When you were talking about the kind of pluses and minuses for 2024, it sounded like, I thought I heard you said you might start to see a mix of capital and recurring revenues, which can ramp the top line a little faster. But then in some of your prepared commentary, I thought you might have mentioned sales of the combined solution with Siemens Healthineers might start in 2025. So just wanted to get a clarification there.

[Arun Menawat, executive]

Yes. No, I think that's a good question. So I think what we are beginning to hear, Michael, first of all, we're now, we have multiple sites that are now increasing their usage. And that was one of the reasons, obviously, Q4 was in terms of the usage and the revenue was a decent number. But we're starting to hear from a number of sites that they might very well be interested in the, more of the standard medical device model where you're paying a certain amount for the upfront system and then you're paying perhaps slightly lower amount for the disposable part of this. And so we have evaluated a number of these models. And so I think that my comment related to the Siemens and my comment related to the capital plus recurring are two separate things.

So my point is that I think even in 2024, we're likely to see that we'll start to see some capital revenue starting to come in for those hospitals that already budgeted for this, and we'll have budget even in 2024. I think some of those will close this year. So that is related primarily to TULSA business. And then second half of 2025, I think at that point, when we get closer to it, we'll sort of describe the business models in more detail, but that's a separate thing.

[Michael Sarcone, analyst]

Okay. That's really helpful. So I guess, just to stay on that topic, you're expecting to end the year at 75 TULSA system. So I mean, could you give us any color just as we update our models for 2024, right? That's an incremental 25 systems from where you are today. What portion of those systems could be sold under this kind of revised capital sales model? And then any color you could provide on where you think system ASPs might be for some of these new arrangements you're going to have at some of these sites?

[Arun Menawat, executive]

Yes. Micheal for today, I only wanted to give the heads up that you will start to see some capital revenue. I think what our plan is that as that evolved. I think we will try to provide more color every quarter. But I think all in all, at this point, what we're saying we grew 60% last year. We grew about the same the year before that. And I think we're sort of in that league at the moment. And the mix of how we get there could be a little bit different and that if it changes, as we get to the quarters, I think we will, we want to. We just don't think that we have enough history to be able to provide that type of guidance just yet, Michael.

[Michael Sarcone, analyst]

Okay. Totally fair. I understand. And then I guess one last one on the topic, and that will be good for me. What are the reasons that some of these systems that working with now are saying they prefer to pay upfront versus the more higher-priced consumable model? What's making them change they're doing now?

[Arun Menawat, executive]

I think it's just usage. They're finding that they're using it more frequently, they can start to see that once the reimbursement comes in, that the usage can increase. So it's more related to "hey, we want to go to more standard models and service agreements capital allocations for the product. There's nothing unusual" I think it's just hospital's saying, "hey, we want to go through a standard model" And our product is much more, it's stabilized in sense we're not necessarily updating software every day as compared to when we started, where lots of things are changing, it's pretty stabilized. And I think we are also looking at it from the perspective that when we introduced it, the best way to do so was with a recurring revenue.

And as we bring new technologies like TULSA AI, that we are trying to figure out how do we monetize some of that innovation. So it's, as I said, at the moment, I just wanted to sort of give you a heads up that it's something that we're evaluating, and so you might see some changes in the mix. But I don't think Michael there is anything unusual with respect to what the hospitals are asking or what we will evolve into.

[Operator]

Our next question comes from Brian Gagnon with Gagnon Securities.

[Brian Gagnon, analyst]

A couple of questions. I'm going to stick on this capital sales thing. I understand completely as to why it's beneficial because there are capital budgets out there for this. On the disposable side of things, in our minds, should we be thinking about a relatively small discount from where your current disposable prices are?

[Arun Menawat, executive]

Yes, I think so, Brian. I think that the other way that would be helpful is we've talked about the fact that our margins are decent even at the low volumes. And I think that what we've talked about the fact that as the volumes increase, our margins will be 70% plus 70% to 75% range. And I think from that perspective, I, we are still very comfortable that as the volumes increase, that our margins will be in that 70%, 75% range. So whatever that discount will be, it will not affect the margins of our business.

[Brian Gagnon, analyst]

Great. That's excellent at this point in the game. Can you talk at all about new contract signings for '23? Kind of how many did you do? What are you thinking about for '24. You signed some very big ones that are multiyear. And then if you would layer into that what your pipeline looks like and how you're doing on executing against the pipeline that's there?

[Arun Menawat, executive]

Yes. So I think that we have, we have, we publicly said we've had multiple corporate agreements. And if we add those up, I think we feel very comfortable with the number 75%. But having said that, I think historically, it's been it's taken some time to get them installed and even in some cases, even after they're installed to getting them going with respect to decent treatment rates has taken 6 months or longer in some cases. And we've talked about that historically as well. I would say, again, it's an estimated-estimate that we think that at least half of the 25 will come from the contracts that we already have, and the other half will probably come from the pipeline that we have, which continues to build. That's probably sort of a reasonable overall estimate.

I think that we I think at least logically, as the reimbursement data unfolds. I think it's possible that some of those commercial contracts or the corporate contracts could start to accelerate. It's, so I think it is one of those inflection year points where a lot of the rate of adoption is likely to depend upon the data at the end of July. But I do think that coming into 2024, we're coming in with a pretty good set of contracts that we should be able to meet the target of 75.

[Brian Gagnon, analyst]

Okay. If you would, can you talk a little bit more about your pipeline and how it's looking to you at this point?

[Arun Menawat, executive]

I think this year, we're primarily focusing on hospitals at this point. Part of it is because a lot of the Medicare patients tend to go to these hospitals. And so most of our pipeline at the moment is for hospitals. I think you will continue to see further adoption in the leading hospitals, because we've had such a good uptick in the Pristine hospital, I think you will continue to see that trend. But I think this year, you will see mid-tier hospitals also adopting the technology. And part of this is that we will be talking with ASCs, we'll be talking with about the full motor treatment pathway. And getting their feedback for this year. And if this whole concept makes sense, I think then ASCs and looks more right for the 2025 strategy.

So 2024, our thought process is more focusing primarily on continue to focus on hospitals.

[Brian Gagnon, analyst]

Okay. Last question for me. It's always been a good indication for me on a technology if there are multiple installs within an institution. And I think you have multiples at Mayo, RadNet and Halo. One, confirm that for me? And two, are there others like Cleveland that you could see multiple installations being completed by the end of the year?

[Arun Menawat, executive]

Yes, most certainly. I think probably by end of this year, we'll probably have 5 or 6, maybe 7 institutions where we will have multiple systems. Aaron I agree with you. That is something we've been looking at also just to see, I think the Mayo was a very good example where they started very conservative start at the Florida site and then it went on to the Rochester side, which is doing very well. And I think Cleveland Clinic, I expect will happen the same way. I think the hardware system with both [indiscernible] women and [indiscernible] in general, they're now the same system. So, so you will absolutely see that. And I agree with you, that is a good early indicator.

[Brian Gagnon, analyst]

Is Cleveland installed and up and running the first one?

[Arun Menawat, executive]

It's. Yes Cleveland is installed and up and running.

[Operator]

Our next question comes from Chris Potter with Northern Border Investments.

[Unknown Analyst]

Are your various sites starting to see a backlog of patients who want or need the procedure but are choosing to wait until 2025 when the permanent code is in effect?

[Arun Menawat, executive]

Yes. Chris, that's a very interesting question, actually. I can share two things with you. One is that we are now, this is for the first time, we're seeing patients at multiple sites that are being scheduled 60 to 90 days in advance. So I think that we are starting to see more streamlining of how they bring the patient into the TULSA pathway and then they're scheduling them based upon a fixed schedule that actually was and has been an issue because we are such a new technology that getting to routine possibly have been one of the things we've had to overcome.

The second thing is that if I look at the number of patients that get educated or come to our website from where they get educated on TULSA. That number is 10,000 to 20,000 a month, like it's a huge number. And yet, you can see the number of patients being treated is still very modest. So our belief is definitely that there are a number of patients who are interested, but are not able to get the treatment because it is pretty expensive today. And yes, we are hearing because we talk to 300, 400 patients a month. And so we do hear from them is that I really want TULSA, but if it's only [indiscernible] 7, can I wait to 6-9 months for reimbursement to kick in. So this is all early stage. This is all indicative data. But yes, I think it's a great question, and it is something that we are, that gives us more confidence about the future.

[Unknown Analyst]

And just one other. Is there anything else you can say about your instinct about utilization post January 2025. if I'm doing the math right, I think your systems are averaging 20 to 25 procedures per year. Could that number be 35 or 40 procedures per year in 2025 when reimbursement is in effect?

[Arun Menawat, executive]

Yes. I think that we're not like a drug company, so it's not going to just happen in 1 day, but I do think that the number of procedures per site will increase in a step change fashion. So we're not out of the realm of possibilities of what you're saying.

[Operator]

Our next question comes from Craig Berson with UBS.

[Unknown Analyst]

The last gentleman asked few of the questions I was going to ask. And, but so in terms of reimbursement, is there any color, any comments you can make about what physicians or hospital systems are saying to you about what the reimbursement may do to their plans for deploying more systems and service more patients? Is there any color you could give us on that topic from their side?

[Arun Menawat, executive]

I think at the moment, my thinking is that we're probably another quarter to 2 years away from that. I think we'll get to that color most likely in the Q2 call. I think we should, by that time, have some information to be able to give you some reliable information.

[Unknown Analyst]

That's fair. I was just curious, the last, the first part about the patient demand and interest exists very helpful.

[Arun Menawat, executive]

Yes. No, I think to the extent that we hear that a number of sites report that they, many patients are asking for TULSA by name. I think from that perspective, we're in decent shape.

[Unknown Analyst]

Good. I mean my humble opinion is I think this is just 1 person's opinion, if there's potential for some, at the time that you guys think is right, additional PR to get the stories out there in the social media, would have you on just how effective patient-friendly, payer friendly system friendly these procedures are. And so I think getting the word out, I think you're just starting to touch it. It's [indiscernible] on investors. But I think the stories you read are tremendous, in terms of the impact on patients lives. So that's just more PR on that would be to build up the demand. I think a good idea.

[Arun Menawat, executive]

Agreed. And I think that we are, we are certainly #1 on the social media. On this. And I do think that more of the PR, like, for example, late last year, AARP on their own picked up the story, and it really raised awareness. And I think that in 2024, you will see more of the news media picking up more and more of our urologists are also now talking to their local news media and providing the information. But bottom line, you're right, that is more and more likely in 2024 as well.

[Operator]

We have a follow-up from the line of Brian Gagnon with Gagnon Securities.

[Brian Gagnon, analyst]

First off, Matthew, congratulations on your promotion, very well deserved. My question is kind of a big picture question. So we're talking about the potential with a Siemens kind of full continuum of care and/or GE and/or Philips at some point where a patient can walk into a urology practice. And from finding out a modestly high Gleason Score, they could go in, get diagnosed get a biopsy and get treated in a very short period of time, call it, days, if not weeks, and walk out cancer free.

[Arun Menawat, executive]

That's exactly the plan. That's exactly the idea. And for a urologist to control from the very beginning to the end and for all of the imaging to be in one place so they can see all of the changes going on in the patient and to be able to follow the patient for a year, 2 years, 5 years. That's exactly the vision. And that's exactly one of the reasons why Dr. [indiscernible] was the one to provide the quote because he's one of the pioneering urologists in the world really who is focused on this strategy.

[Brian Gagnon, analyst]

Can a urology practice keep an MR busy enough on their own to justify the expense?

[Arun Menawat, executive]

Yes. So we have done some of the initial economic models, and we believe that is very, very likely. And again, part of it is because the fact that they can have a revenue stream from every visit of the patient that they don't have today. And part of it is the, in fact, that they will own the patient, right? So right now, the patients come in and some of them will go to radiation and so on. I think they will actually be able to increase that number of patients that didn't treat with TULSA. And by the way, there's another revenue stream that we have not really quantified at least so far, is that if they have an MR, there's no reason why they couldn't use it for other procedures like bladder cancer or cervical cancers and so on.

So the answer to your question is most definitely, they will be able to utilize the MR and economically justify with relative ease, quite frankly.

[Operator]

That concludes the question-and-answer session. At this time, I would like to turn the call back to Dr. Menawat for closing remarks.

[Arun Menawat, executive]

Thank you so much for listening in the Q&A session, and we're looking forward to updating you at the end of Q1. Thank you.

[Operator]

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.